Google is taking a much more modest approach to the smartphone industry after its disastrous first effort.
The online search giant made a massive bet in mobile hardware in August 2011, announcing a deal to acquire Motorola Mobility and its patent portfolio for $12.5 billion. It outlined plans to run Motorola as a separate business, with the venerable manufacturer remaining a licensee of Google’s Android platform.
"I'm really excited about protecting and supporting the Android ecosystem," Google CEO Larry Page said at the time. "We really believe that Motorola has tremendous opportunity for growth."
On paper, at least, the deal made some sense, providing Google with the opportunity to tightly integrate its mobile operating system with a line of devices, developing both hand in hand.
That isn’t quite how things worked out, however, and by early 2014, Motorola was gone, sold to Lenovo for a mere $2.91 billion. Google did retain the “vast majority” of the patents it picked up in the deal, but the company had pegged their value at $5.5 billion. So Google clearly took a major haircut with the Motorola sale.
Google and Motorola reportedly had difficulties figuring out how to integrate the two businesses, and Google “literally built a firewall” between the two sides, which surely made it difficult to evolve its handset and software efforts in coordination with each other. And Google likely faced significant pushback from its Android manufacturing partners, who surely saw the acquisition as a threat.
The failed effort didn’t completely dampen Google’s enthusiasm to pursue the mobile hardware market, however, as evidenced by recent news that the company will spend $1.1 billion to pick up part of HTC’s mobile workforce. HTC built the first Android-based phone, the G1, nearly 10 years ago, but the Taiwanese firm has seen its worldwide market share wane in recent years as Samsung and Apple dominated the high end of the market, while several Chinese vendors have gained ground in the budget market with less expensive handsets.
HTC assembles Google’s Pixel phone, although the move likely signals Google’s intention to develop a range of devices including virtual reality headsets and perhaps other gadgets. The looming question, of course, is whether it can apply some lessons from the Motorola debacle as it does so.